Analysis of Credit Schemes of National Bank Limited

AN OVERVIEW OF THE NATIONAL BANK LIMITED:

National Bank Limited has its prosperous past, glorious present, prospective future and under processing projects and activities. Established as the first private sector bank fully owned by Bangladeshi entrepreneurs, National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private sector. From the very inception, it was the firm determination of National Bank Limited to play a vital role in the national economy. We are determined to bring back the long forgotten taste of banking services and flavors. We want to serve each one promptly and with a sense of dedication and dignity. At present we have 145 branches under our branch network. In addition, our effective and diversified approach to seize the market opportunities is going on as continuous process to accommodate new customers by developing and expanding rural, SME financing and offshore banking facilities. We have opened 10 branches and 5 SME/Agri branches during 2010.

The then President of the People’s Republic of Bangladesh Justice Ahsanuddin Chowdhury inaugurated the bank formally on March 28, 1983 but the first branch at 48, Dilkusha Commercial Area, Dhaka started commercial operation on March 23, 1983. The 2nd Branch was opened on 11th May 1983 at Khatungonj, Chittagong.
At present, NBL has been carrying on business through its 130 branches and 15 SME / Agri Branches (total 145 service locations) spread all over the country. Since the very beginning, the bank has exerted much emphasis on overseas operations and handled a sizable quantum of home bound foreign remittance. It has drawing arrangements with 415 correspondents in 75 countries of the world, as well as with 37 overseas Exchange Companies located in 13 countries.

MISSIONS OF THE NATIONAL BANK LIMITED:

The missions of the National Bank are as follows: The aim of NBL is to become one of the leading Banks in Bangladesh by its prudence, fair and quality of operation.

• Its effort for expansion of its activities in home and abroad by adding new dimension to its banking services is contributed unabated.
• It is also putting highest priority in ensuring transparency, accountability, and improved clientele services as well as to its commitment to serve the society through which it wants to get closer and closer to the people.
• Its goal is to act as a caring companion in uplifting the national economic standard through continuous gradation and diversification of its clientele services in line with national and international requirement.
• It intends to meet the needs of its clients and enhance its profitability by creating corporate culture.
• It believes in strong capitalization.
• Its aim is to ensure its competitive advantages by upgrading banking technology and information system.
• It maintains high standard of corporate and business Seth’s. It provides high quality financial services to strengthen the well being and success of individual, industries and business communities.

  VISIONS OF THE NATIONAL BANK LIMITED:

Ensuring highest standard of clientele services through best application of latest information technology, making due contribution to the national economy and establishing ourselves firmly at home and abroad as a front ranking bank of the country are our cherished vision.

  PRODUCTS AND SERVICES OFFERED BY THE NATIONAL BANK LIMITED: 

 General Products:                   

 1. Savings Account

2. Current Account

3. Corporate Account

4. Short Term Deposit

 Deposit Scheme: 

 1. Special Deposit Scheme

2. Monthly Saving Scheme

3. Education Scheme

4. Double scheme

 Loan Scheme:      

 1 .Loan General

2. Terms Loan

3. SOD

4. Cash Credit

5. Loan against Imported Merchandise

6. Loan against Trust Receipt

7. Loan against House Building S. Housing Loan Scheme

9. House repairing / Renovation loan Scheme

10. Consumers Finance Scheme

12. Festival Personal loan Scheme

13. Small Business loan Scheme

14. Personal loan Scheme.

15. Working Capital Loan.

16. Contractor Loan. Etc

Services:

 1. Western Union money transfer.

2. First Solution

3. Locker Services

4. Remittance- T.T., D.D

5. Online Banking.

6. Quick Pay.

7. Samba.

8. A to Z money transfer.

9. Al- Fardan.

10. Git.

11. Coin Star.

12. Express. Etc.

SWOT ANALYSIS OF THE NATIONAL BANK LIMITED:

SWOT analysis is the detailed study of an organization’s exposure and potential in the perspective of its strength, weakness, opportunity and threat. This facilitates the organization to make their existing line of their performance and also foresee the future to improve their performance in comparison to their competitors. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization.

  Strengths: 

National Bank Limited has already established a favorable reputation in the Banking industry of the country. It is one of leading private sector commercial banks in Bangladesh. The bank has shown a tremendous growth in the profit and deposits sector.

National Bank Limited has already achieved a high growth rate accompanied by an impressive profit growth rate in 2010. The number of deposits and the loans and advances are also increasing rapidly.

National Bank has the reputation of being the provider of good quality services to its potential customer.

  Weaknesses:

The main important thing is that the bank has no clear mission statement and strategic plan. The banks not have any long term strategies of whether it wants to focus on retail banking or become a corporate bank. The path of the future should be determined now with a strong feasible strategic plan.

The bank failed to provide a strong quality recruitment policy in the lower and some mid level position. As a result the services of the bank seem to be dues in the present days.

The poor service quality has become a major problem for a bank. The quality of the service at National Bank Limited is not higher than the Dhaka Bank, Prime Bank or Dutch Bangla Bank etc. So the bank has to complete with the multinational bank located here.

Some of the job in National Bank has no growth or advisement path. So lack of motivation exists in persons filling those positions. This is a weakness of NBL that it is having a group of unsatisfied employees.

In terms of promotional sector, NBL has need to give more emphasize on that. They have to follow aggressive marketing campaign.

NBL remittance payment system is very poor, to pay a customer bank consume huge time ( in some cases it takes a day to pay), because their IT investment is very poor.

 Opportunities:

In order to reduce the business risk, NBL has to expand their business portfolio. The management can consider options of starting merchant banking or diversify into leasing and insurance sector.

NBL has a huge scope to increase their customer service quality. By investing more in IT sector and recruit dynamic people who can ensure maximum customer benefit.

The percentage of classified loans of NBL is about 5% and in Babu Bazar Branch it is less than 1%. So here bank has a huge scope to maximize their performance.

A large number of private banks coming into the market in the recent time in this competitive environment NBL must expand their product line to enhance its sustainable competitive advantage in that product line, they can introduce debt card and ATM Booth system for their potential customer.

In addition of those things, NBL can introduce special corporate scheme for the corporate customer or officer who have an income level from higher to lower. At the same time, they can introduce scheme or loan for various service holders and the scheme should be separate according to the professions such as engineers, lawyers, doctors etc.

Threats:

All sustain multinational banks and upcoming foreign private banks possess enormous threats to NBL. If that happen the intensity of competition will rise further and banks will have to develop strategies to compete against on slough of foreign banks.

The default risks of all terms of loan have to be minimizing in order to sustain in the financial market, because default risk leads the organization towards to bankrupt. NBL has to remain vigilant about this problem so that proactive strategies are leading them to minimize this problem if not eliminated.

The low compensation package of the employees from mid level to lower level position is another threat of the NBL. As a result, good quality from employees leaves the organization and its effects the organization as a whole.

 LOANS AND ADVANCES OF THE NATIONAL BANK LIMITED

National Bank Limited formulated befitting credit risk management criteria and strategies for creation of balance lending mix in its portfolio both for short and long term with the bottom line objective to ensure risk adjusted rate of return in its credit transactions. Loan and advances in the year 2010 registered an increased by 41.26% to BDT 92,003.56 million from BDT 65,129.29 million in 2009. During the year 2010, the credit expansion mainly was in–

a) Bilateral project finance.

s) Syndicate finance.

c) Export.

d) Import.

e) Trade financed.

f) SME and

g) Agri finance.

The bank as a matter of policy prioritizes to make lending in the thrust sectors of the economy so as to make distinctive value addition in overall economic uplift of the economy.

  CLASSIFICATIONS OF LOANS AND ADVANCES OFFERED BY THE NATIONAL BANK LIMITED:

The main business of bank is to settle Loan & Advance. Bank collects deposits or saving from one kind of people of society and invests these deposits as loan, subject to certain conditions, to other kind of people.

 Usually National Bank provides following types of loan to its customer—

  CURRENT OR CONTIOUS LOAN:

Current loan is also called revolving credit. Current loan holder can withdraw or deposit money in his account in several times with in the loan period. If loan holder wants to renew his loan amount then it can be done with the authorization of the bank. Current loan duration time is one year and interest is charged by quarterly basis. At the end of the loan period borrower pays loan amount with the interest. There are two types of current loan. They are-

1 Cash Credit.

2 SOD.

3 Demand Loan. And

4 Term Loan.

  Cash Credits:

 There are two type of cash credit. These are

i) CC-pledge

ii) CC-Hypothecation

i) CC-Pledge:

CC-Pledge is sanctioned against pledge of marketable commodities. When such advance is allowed to traders or wholesalers or stockiest the underlying merchandise is pledged with the banker. When manufacturing concern is allowed CC-pledge facilities, commodities such as raw materials, finished products, stores and spares are taken under pledge,

ii) Cash credit-Hypothecation:

Another type of cash credit is Hypothecation- in short CC (HYPO) This is also an advance against stock of commodities and finished products but CC (HYPO) is also extended against work-in process, Bills receivable, commercial vehicles etc. for a borrower CC (Hypo) is advantageous because in hypothecation neither ownership nor possession of goods is transferred to the bank but an equitable charge is created over the movable assets in favour of the bank. The goods remain under the possession of the borrower who binds himself to give the possession to the banker whenever the latter requires him to do so.

Secured Over Draft (SOD):

• Overdrafts are those drawings, which are allowed by the banks in excess of the balance in the current account up to a specified amount for definite period as arranged for.

• Usually provide against FDR.PSS, i.e. financial obligation or any primary securities. The interest charges from the date of first withdraw.

• Interest is calculated and charged only on the actual debit balance on daily product basis.

• Balance of OD accounts are fluctuates

• The interest rate of SOD is 3% above of FDR interest rate if the FDR is in our Bank.

• If the FDR is in other bank then the interest rate is 14.50%

a) SOD against Work order:

Advances may be allowed in the form of overdraft to genuine contractors against work orders from various Government and semi-government agencies and other reputed organizations.

b) SOD (Bid Bond)

SOD (Bid Bond) is given to those borrowers who want to participate in a bid for collection of work. In SOD (Bid Bond) payment is making by the pay order. If borrower gets that work then interest is charged on that amount If borrower does not get that work then he deposit that amount which he has issued by pay order.

 Demand Loan:

The loan that becomes repayable on demand by the bank will be treated as Demand Loans. If any contingent or any other liabilities are turned to forced loans those too will be treated as Demand loan.

a) LEVJ (loan against trust receipt)

When the importer fails to pay for the import bills, bank can allow certain facilities. In case LIM facility is given, the bank itself arrange clearance of the goods on payment of import duty, sales tax etc. and store the goods at the bank’s go down subject to its release in part or in entirely against payment at a time or gradually as per arrangement with the importer.

b) Payment against Document (PAD)

Payment made by the bank against lodgment of shipping documents of goods imported through L/C falls under this type head. It is an interim type of advance connected with import and is generally liquidated shortly against payments usually made by the party for retirements of documents for release of import goods from the customer authority.

c) Loan against Trust Receipt (LTR)

Advances allowed for retirement of shipping documents and release of goods imported through L/C without effective control over the goods delivered to the customer fall under this head. The goods are handed over the importer under trust with arrangement that sales proceed should be deposited to liquidate the advances within a given period. This is also temporary advance connected with import that is known post-import finance under category ‘Commercial lending’

 d) Inland Documentary Bill Payment (IDBP)

Payment made through purchase of Inlands Bill to meet urgent requirements of customer fall under this type of credit facility. This temporary advance is adjusted from the proceeds of bills purchased for collection.

e) Foreign Documentary Bill Payment (FDBP)

Payment made to a party through purchase of foreign documentary bills fall under this head. This temporary advance is adjustable from the proceeds of negotiable shipping/export documents. It falls under category ‘Export Credit’.

f) Packing Credit (PC)

Packing credit limit is sanctioned to the exporter against the security of R/R, B/R, truck receipt etc evidencing transportation of goods from up-country to the port for shipment, in addition to the usual charge document and original export letter of credit contract. This type of credit is given for transit period starting from dispatch of the goods by the exporter to finance transportation and freight of goods to sustain the export activity.

Term Loan

NBL also offers term loan to its customers by giving different terms and conditions like- HBL, EHBL, Car Loan, and CCS etc. Those are explained below:

 i)  House Building Loan:

Purpose:

To help people of all classes to purchase house/flat or to construct house Size of Loan: Maximum limit 75 lac taka Debt Equity ratio:

A. Max 70:30 for purchasing flats/houses.

B. Max 80:20 of construction cost (for-Construction).

 Repayment period:

The loan is to be repaid by monthly equal installments including interest within maximum period of 20 years (including grace period) depending on the size of loan and repayment capacity of the borrower.

Grace period:

For purchase of fiat (s)/houses(s):

The client will enjoy maximum 9 month’s grace period from the date of availing of the loan. Repayment will start from the 10th month of availing of the loan and the entire loan will be adjusted within the validity period. For Self-Construction:

The client will enjoy maximum 12-month’s grace period from the date of availing of the loan within which construction is to be completed. Repayment will start form 13th month of availing of the loan and the entire loan will be adjusted within the validity period.

Interest

Floating Rate

13.50% P.A subject to change by the bank from time to time. Interest to be charged at monthly rate.

(n)

Fixed Rate

14.00%-15.0G% P.A to be charged at monthly rest

National Bank Limited (NBL) in 2007 introduced 2 (two) Housing Loan Products for individuals who desires to construct own residential home or apartment or decides to improve/ renovate/ expand their existing residential house/ apartment. The products are:

a) Long Term Housing Loan under the Scheme “NBL Housing Loan” to construct or purchase residential building or apartment. And

b) Medium Term Housing Loan under the Scheme “Small Housing Loan” for repair, renovation, extensions etc. of existing building or apartment to individuals only.

Side by side NBL also provides General/Commercial House Building Loan to the Developers/Individuals for developments/construction of apartment/commercial complexes which does not fall within the purview of NBL Housing Loan or Small Housing Loan. Thus Housing loan products have created an opportunity for NBL to make best use of its fund to maximize its profit and participating to enhance the housing stock of the country. In 2010 total amount of Tk. 5,864.96 million has been sanctioned under t

ii) Employees house building loan (EHBL):

The employee of NBL can take house-building loan from bank but the range of loan amount depends on person’s designations. Simple interest rate is charge on employee’s house building loan and interest rate is 8%.

 iii) Consumer Credit Scheme

The products of National Bank with their financing items under CCS loan are given below:

• Household Durable Loan for Motor Cycle, Personal Computer.  Photocopier,
• Fax machine. Small PABX system, Television, Mobile Phone set, Refrigerator, Audio video equipment, other home electric appliances furniture and any other household items.
• Car Loan for Car, Jeep, Station Jeep, Pick up Van, Cover Van, Bus, Truck,   Ambulance and any other vehicle for own use.

•  Advance against salary for any qualified person.
•  Education Loan for study purpose only.
•  Travel Loan for traveling purpose.
•  Wedding Loan for wedding only.
•  CNG Conversion Loan to convert into CNG.
• Any Purpose Loan for emergency need.
• Hospitalization loan for treatment in the hospital.

 Credit Limit, Period of Loan, Down Payment:

Under CCS program of National Bank Limited a borrower can get maximum of taka 4,000,000 and minimum taka 20, OOO. The down payment is 10% of the loan for each product.

Interest and other charges:

The interest rate is 15% for the all products. And National Bank charges 1% service charge and 1% risk fund for all products other than for Car loan, Doctor’s loan, Advance against salary and CNG Conversion loan.

 WORKING CAPITAL LOAN

 Business Enterprises (other than public limited company) engaged in manufacturing, trading business.

 Purpose:

 To meet working capital requirement

 Nature of Loan:

 Cash Credit

 Eligibility:

 Firm/Companies incorporated in Bangladesh

 Age Omit of person:

• Minimum age 25 years.
• Maximum age 65 years

 Loan Size:

 Maximum TK. 10000000 only.

 Debt-Equity Ratio:

 Depending on the nature and risk in the business.

 Security /Collateral:

 *    Hypothecation of stock in trade duly insure with bank mortgage clause.

•    Pledge of stocks duly insure with bank mortgage clause.

•   Legal mortgage of land,   building,   machinery within city corporation and/or Municipal area preferably 1^s‘ party, where required.

 Rate of Interest

 (a) 4.59% p.a. with quarterly rest or received from time to time.

 Penal interest

 Additional 2% on the overdue/excess over limit, if any

 Legal documents:

 *    D.P note

 CONTRACTOR LOAN:

Individual, Business Enterprises

Purpose:

To execute work order awarded by Govt/semi Govt. & autonomous bodies.

Nature of Loan:

Secured Overdraft (SOD).

Eligibility:

Any business house in the command area having at least two years experience in their line of business

Age limit of person:

•    Minimum age 25 years.

•    Maximum age 65 years.

Loan Size:

50:50

Security /Collateral:

•    Legal mortgage of land, building, machinery within City Corporation and/or Municipal area. •    Registered power of attorney to sell the   mortgaged   property   without intervention of court. •    Assignment of work order.

Rate of Interest

@1 5.00%   p.a.    With   quarterly   rest   or received from time to time.

 Some other types of the loan schemes that are provided by NBL are explained below:

 RURAL MICRO-CREDIT AND AGRI-FINANCING:

The Bank, from the year 1993, started focusing on rural and micro credit and in its effort, delivered credit services to the marginal farmers through Barendra Multipurpose Development Authority (BMDA) and subsequently intensified the area coverage through extension of the facilities to Naogaon, Chapai Nababganj and Thakurgaon districts and succeeded plausibly to change the socio economic of the marginal farmers. The bank, in 2010, has made significant contribution in Agri sector by sanctioning fresh Agri loan to tune of BDT 775.00 million among the targeted segments comprising of 56,938 borrowers.

 SME AND WOMEN ENTREPRENEURS FINANCING:

The role of Small and Medium Enterprise (SME) acts as the engine for the growth of the countries economy. Due to labor intensiveness and shorter lead time of production, the SME sector can create huge employment opportunities and its contribution is immense for the economic growth. Limited access to financing SME still forms the crux of the problem.

NBL expanded its SME financing activities through its large network of 145 branches and SME/Agri Branches attracting entrepreneurs in various fields of trade and industry. NBL launched different attractive products for the SME sectors.

Total disbursement in the SME sector was BDT 14,094.70 million in 2010 against BDT 8,253.00 million of 2009, which registered 70.78% growth. As a matter of policy perception, they are prioritizing to bring more women entrepreneurs within the fold of their SME lending activities. To this effect, they have launched dedicated product for this segment titled as “Nari Jagoron” which has in the meanwhile received wider acceptance. Moreover NBL has enhanced 10% of SME related fund among the women entrepreneurs as directed by Bangladesh Bank.

 SYNDICATION AND PROJECT FINANCING:

National Bank Limited prioritizes to appreciate the loan syndication both as a lead and as participating Bank for the large ticket borrowers. The modality of syndicated finance enables the Banks to diversify the credit portfolio. The syndicated finance creates opportunity for risk sharing and standard of credit remains on the higher end because of co-appraisal by the multi-banks/ financial institutions. NBL participated in syndicated loan arrangements for financing in the different sectors of the economy like, textiles & spinning, RMG, Pharmaceuticals, power plants, food processing etc. So far, the bank extended financing in loan syndication to the tune of BDT 3,938.20 million, comprising of 22 deals in different capital intensive projects.

RETAIL BANKING OR CONSUMER CREDIT:

To help the needs of household individuals for purchase of various consumable products NBL introduced retail loans or consumer credit during last couple of years. There are number of products introduced for the customers like any purpose loan and consumer durable loans.

LEASE FINANCING:

As part of diversification of credit products, National Bank has introduced Lease Financing Scheme which can be availed from any branch of the bank. To assist a large group of people especially industrialists, business entities or individuals the scheme is designed with competitive terms \and conditions. The scheme facilitates to acquire capital machinery, equipment, medical instrument, automobile, CNG refueling machinery and consumer durable etc. Besides, the individuals and industrial entrepreneurs are showing much interest in Lease Financing to increase production, restructuring through BMRE etc. The bank has already sanctioned lease finance amounting Tk. 84.05 crore up to December 31, 2010 under Lease Financing Scheme.

CREDIT ADMINISTRATION:

Bank’s investment are always exposed too much risk both external and internal. Profit maximization of a bank depends on optimum utilization of its assets. The Bank structured devices and pragmatic approaches to pin point the inherent risk associated with loans and advances and keeps constant follow up of the credits, right from its sanction and continues its efforts to keep the credits performing and unclassified. With constant vigilance default culture of borrowers has substantially declined.

CLASSSIFIED LOANS AND ADVANCES:

Among other banking activities, “Loan Classification” and “Provision Build-Up” there against is very significant. If any loan account shows any difficulties or weakness in its objectives, it undergoes with close monitoring of the Management according to Bangladesh Bank directives.

By taking all their effort & effective measures Bank succeeded to prevent further bad debt and reduced 6.13% to Tk. 3,642.57 millions as on December31, 2010 from Tk. 3,880.31 millions in previous year. Besides, Bank also achieved a success in regard of recovery of non-performing loans. During the year Bank recovered Tk.568.17 millions & Tk. 268.01 millions against classified loans & advances and written-off loan respectively. The amount of non-performing loans also decreased remarkably to 3.96 percent of total loans and advances.

During the year under review, National Bank maintained provision of Tk. 2,547.36 million as on December 31,2010 against requirement of Tk. 2,444.57 million ( including Off-Shore advance & off-balance sheet items) keeping a surplus of Tk. 100.29 million.

 CHAPTER 4: CREDIT MANAGEMENT

INTRODUCTION:

Credit management is the part of bank management which decides what type of lending product will be offered, to whom it will be offered, how much it will be offered and analyze and measure the credit risk on loans and manage all the activities regarding the loans. The aim of the credit management is to have a secured loan portfolio so that the bank can earn profit by keeping the depositors savings secured. The entire job regarding that consist the credit management.

 LOAN PROCESS OF THE NATIONAL BANK LIMITED:

 A) Application for the Loan

The loan process starts with the submission of loan application by the borrower. The borrower submits an application for loan to the branch manager. In the loan application borrower provide following information

•    Personal Details of Applicant.

•    Nature of business.

•     Amount and duration of the loan.

•     Purpose of the Loan.

•    Details of the collateral.

 Preparation of Loan proposal

Loan proposal are prepared in prescribed format. At the time of originating a proposal accuracy of all information is ensured. Originating officers follows credit principles, credit policy and guidelines and conduct due diligence on new borrowers, principals and guarantors. That is also adhering to the NBL’s established Know Your Customer (KYC), Money Laundering guidelines, and Bangladesh Banks regulations.

For initiating credit relationship credit officer call on (he client, visit factory/business center to see Production facility/stock/storage pattern/business transaction/reputation etc and through these, assess possibilities of establishing a remunerative relationship, He/She also conduct due diligence to get market information on the borrower from industry sources, competitors, local area. Branch Manager may also be part of this process, hi this regard, if required, the BM/Credit officer also take help of head Office Engineer/HO personnel for initial assessing credit needs of large borrowers.

 Based on findings of such calls/visit/inspection, Credit Office Officer, along with the Branch Manager, initiate proposal, containing information on client’s background, business, market share, integrity, credit exposure/existing banking relationships, and credit needs along with pricing etc.

 Required Documents and steps for loan proposal:

 From sending proposal to the approving authority to renewal or enhancement of the loan the originating official of the branch ensures the following document have been completed properly and incorporated in the credit proposal appropriately:

1. Title Deed.
2. Power of Authority Deed.
3. Lease Deed.
4. Khatian- CS, RS, PS, BS.
5. Bia- Deed.
6. Parcha.
7. Dakhila/ Rent Receipt.
8. Mutation khatian with order sheet and DCR.
9. Rajuk/ PWD Development Authority Permission with Approved Plan.
10. Municipal Holding Tax.
11. Mouza Map.
12. CDA Permission & Approval Map.
13. Non- encumbrance certificate (NEC)
14. Search Report.
15. CD accounts with the Bank.
16. Application of Letter Head.
17. Proprietors/ Partners/ Directors individual Bio-Data.
18. Photocopy of National ID Card.
19. List of Director for company form (XII) & RJSE Certificate.
20. Board resolution for availing credit facility.
21. Memorandum & Articles of Association attested by Chairman or MD.
22. Copy of Partnership Deed.
23. List of Sister Concerns of the group.
24.  * Up-to-Date Tin Certificate.

             * Trade License.

             * Drug License. (Applicable in case of Chemical/ Medicine Business)

             * VAT Registration Certificate

            * IRC.

            * IDRA Certificate for Insurance Co.

25. CIB Undertaking.

26. Statement of account on NBL & Other banks.

27. Liability position of last 03 years with NBL & Other banks as per format.

28. Properties Individual Net worth & Business Net worth as per format.

29. Guarantors Individual Net Worth as per format.

30. Balance Sheet of last 03 years.

31. Stock Report.

32. Legal Opinion.

33. Valuation of the Security.

34. Proposal.

35. Sanction Letter from Head Office.

36. Mortgage Deed Prepare from Lawyer.

37. Mortgage from Registered Office.

38. Sanction Letter acceptance from Borrower.

39. Documentation.

40. Permission from CAD for disbursement amount.

41. CC account open.

42. Sanction amount disbursed.

43. Before expiry, new proposal prepared for renewal orenhancement.

  Loan amount

Loan amount should be fixed such a way that it will require the needs of the customer or his business. Proper accommodation of a customer may involve lending more or less money than asked for over a longer or shorter period than requested.

  Loan terms and conditions

Loan terms and conditions should be framed in such a way that they will protect bank’s interest as well as customer’s purpose. The loan agreement must be structured in such a way that the borrower may be able to service the loan and be able to comfortably repay the loan as per schedule

 CREDIT ANALYSIS

Credit analysis is the method by which one calculates the creditworthiness of a business or organization. The audited financial statements of a large company might be analyzed when it issues or has issued bonds. Or, a bank may analyze the financial statements of a small business before making or renewing a commercial loan. The term refers to either case, whether the business is large or small.

 Credit analysis involves a wide variety of financial analysis techniques, including ratio and trend analysis as well as the creation of projections and a detailed analysis of cash flows. Credit analysis also includes an examination of collateral and other sources of repayment as well as credit history and management ability. Analysts attempt to predict the probability that a borrower will default on its debts, and also the severity of losses in the event of default. Credit spreads–the difference in interest rates between theoretically “risk-free” investments such as U.S. treasuries or LIBOR and investments that carry some risk of default–reflect credit analysis by financial market participants.

 Before approving a commercial loan, a bank will look at all of these factors with the primary emphasis being the cash flow of the borrower. A typical measurement of repayment ability is the debt service coverage ratio. A credit analyst at a bank will measure the cash generated by a business (before interest expense and excluding depreciation and any other non-cash or extraordinary expenses). The debt service coverage ratio divides this cash flow amount by the debt service (both principal and interest payments on all loans) that will be required to be met.

 Usually to analysis the credit the analyst used two types of technique. Those are —

Time-Series Technique.  And

 Cross-Sectional Technique.

Those techniques are explained below—

Time-Series Technique: The analysis of the performance of a given entity over a period of time is called the time-series techniques.

 Cross-Section Technique: Analyzing the performance of two or more different entities at a given or certain point if time. That means cross-section techniques compare the performance of two or more entities, companies or economy with in one sector.

 Cross-Section Techniques can be classified into two ways—

a) Common-Size Techniques: Common-Size Techniques express the component of balance sheet as a percentage of total assets.

b) Financial Ratio Analysis: Financial Ratio Analysis expresses the component of the income statement as a percentage of total revenue.

In my report I have used both the Time-Series and Cross-Section Techniques to analyze the data.

As the topic of my report is “Credit Analysis of NBL” I have analyzed the credit of NBL from different point of view. I have used five years data (from 2006 to 2010) of NBL for analysis.

      TIME-SERIES TECHNIQUE: In case of Time-Series Technique I have focused on different topics. Those are listed below:

a) Loans and Advances (Taka in million).

b) Advance Deposit Ratio.

c) Concentration of Loans and Advances to Mitigate Risk.

d) Non Performing Loan.

e) Industry wise Loans and Advances (Including Bills Purchased and Discounted).

f) Maturity Grouping of Loans and Advances Including Bills Purchased & Discounted Repayable.

g) Classified, Unclassified, Doubtful and Bad Loans & Advances.

        Loans and Advances (Taka in millions):

 This table is explained below through a Column Chart:

During the year of 2006 the Loans and Advances of NBL was Tk 32,709.68 millions. In the year 2007 it was increases to Tk 36,475.74 millions next year it increases to Tk. 50,665.07 millions . In the year 2009 it stood at Tk 65,129.29 millions and in the year 2010 the loans and advances of NBL increases upto Tk 92,003.56 millions. So in this graph we can see the increasing treand on Loans and advances of NBL.

    Advance Deposit Ratio:

increases at 84.77% and in the year 2010 the Advance Deposit Ratio of NBL stood at 89.78%.

 Concentration of Loans and Advances to Mitigate Risk (From 2006 to 2010):

i) Agriculture

ii) Term Loan to Small Cottage Industries.

iii) Term Loan to Large & Medium Industries.

iv) Working capital to Industry.

v) Export Credit.

vi) Trade Finance.

vii) Credit Card.

viii) Consumer Credit.

Those are explained below:

i) Agriculture:

In the year 2006 the Loans and Advances of NBL in Agriculture sector to mitigate the risk was Tk.98 millions. In the year 2007 it increases at Tk.332.3 millions.  From the year 2008 to 2010 there was an increasing trend in the investment on Agriculture sector. In the year 2008 it was Tk.682.5 millions, in 2009 it was Tk.694.76 millions and in 2010 it was Tk.984.01 millions.

ii) Term Loan to Small Cottage Industries:

            In the year 2006 the Loans and Advances of NBL in the Term Loan to Small Cottage Industries to mitigate the risk was Tk.148.6 millions. In the year 2007 it decreases at Tk.99.7 millions. But in the year 2008 the investment increases at Tk.275.3 millions. In 2009 the investment again decreases and the investment was Tk.110.94 millions but in the year 2010 the investment again increases up to Tk.258.14 millions.

iii) Term Loan to Large & Medium Industries:

In the year 2006 the Loans and Advances in the Term Loan to Large and Medium Industries to mitigate the risk was Tk.4, 172.6 millions. In the year 2007 the amount increases at Tk.6, 393.20 millions. In the year 2009 the amount increases from Tk.8, 322.50 millions to Tk.10, 317.93 millions. In the year 2010 the investment increases at Tk.13, 897.12 millions.

iv) Working Capital to Industry:

To mitigate the risk the Loans and Advances of the investment in Working capital to Industry in the year 2006 was Tk.2, 135 millions. In the year 2007 the investment increases at Tk.3, 421.50 millions. In the year 2008 and 2009 the amount increases from Tk.5, 222 millions to Tk.5, 871 millions. But in the year 2010 the investment amount sharply increases to Tk.9, 154.12 millions.

v) Export Credit:

To mitigate the risk the Loans and Advances of the Export Credit in 2006 was Tk.3, 075.80 millions. In the year 2007 it increases to Tk.4, 216.40 millions. Again in the next year the amount increases up to Tk.5, 792.80 millions. But in the year 2009 the Loans and Advances of the Export Credit decreases to Tk.5, 028.79 millions. In the year 2010 the amount again increases to Tk.5, 059 millions.

 vi) Trade Finance:

 To mitigate the risk the Loans and Advances of Trade Finance was Tk.10, 239.90 millions in the year 2006. Next year in 2007 the amount increases to Tk.10, 339.20 millions. From the year 2008 to 2010 there was a sharply increasing trend in the Loans and Advances of Trade Finance. Like in the year 2008 the amount was Tk.15, 171.60 millions. In 2009 the amount was Tk.22, 559 millions and in the year 2010 the amount was Tk.35, 346.41 millions.

vii) Credit Card:

 In the year 2006 the Loans and Advances of Credit Card was Tk.305.37 millions to mitigate the risk. In the year 2007 the amount decreases to Tk.264.76 millions. In 2007 the amount increases at Tk.253.12 millions. From the year 2009 to 2010 the Loans and Advances on Credit Card sharply increases. In 2009 the amount was Tk.265.09 millions and in 2010 the amount was Tk.412 millions.

 viii) Consumer Credit:

 In the year 2006 the amount of Loans and Advances in Consumer Credit was Tk.55.53 millions to mitigate the risk. But in the year 2007 the amount decreases at Tk.48.2 millions. In the year 2009 the amount increases from Tk.55.42 millions to Tk.58.88 millions. In the year 2010 the amount again decreases at Tk.22.83 millions and it increased the risk.

 Non Performing Loan:

In the year 2006 the percentage of Non Performing Loan was 6.01 percentages but in 2007 it decreases at 4.53 percentages. From 2008 the ratio again increases from 5.39 percentages to 5.97 percentages in 2009. But in 2010 the y was able to decrease the rate at 3.96 percentages which represents a good performance of the Credit Administrations of NBL.

   Industry wise Loans and Advances (Including Bills Purchased and Discounted):

i) Agriculture

ii) Term Loan to Small Cottage Industries.

iii) Term Loan to Large & Medium Industries.

iv) Working Capital to Industry.

v) Export Credit.

vi) Trade Finance.

vii) Credit Card.

viii) Consumer Credit.

i)Agriculture:

This table is explained below through Pie Chart in below:

In the year 2006 the Loans and Advances of NBL in Agriculture sector was Tk.98 millions. In the year 2007 it increases at Tk.332.3 millions.  From the year 2008 to 2010 there was an increasing trend in the investment on Agriculture sector. In the year 2008 it was Tk.682.5 millions. In 2009 it was Tk.694.76 millions and in 2010 the Loans and Advances amount was Tk.984.01 millions.

 ii) Term Loan to Small Cottage Industries:

In the year 2006 the Loans and Advances of NBL in the Term Loan to Small Cottage Industries was Tk.148.6 millions. In the year 2007 it decreases at Tk.99.7 millions. But in the year 2008 the investment increases at Tk.275.3 millions. In 2009 the investment again decreases and the investment was Tk.110.94 millions but in the year 2010 the investment again increases up to Tk.258.14 millions.

 iii) Term Loan to Large & Medium Industries:

 In the year 2006 the Loans and Advances in the Term Loan to Large and Medium Industries was Tk.4, 172.6 millions. In the year 2007 the amount increases at Tk.6, 393.20 millions. In the year 2009 the amount increases from Tk.8, 322.50 millions to Tk.10, 317.93 millions. In the year 2010 the investment increases at Tk.13, 897.12 millions.

 iv) Working Capital to Industry:

The Loans and Advances of the investment in Working capital to Industry in the year 2006 was Tk.2, 135 millions. In the year 2007 the investment increases at Tk.3, 421.50 millions. In the year 2008 and 2009 the amount increases from Tk.5, 222 millions to Tk.5, 871 millions. But in the year 2010 the investment amount sharply increases to Tk.9, 154.12 millions.

 v) Export Credit:

 The table is explained through Pie Chart in below:

 The Loans and Advances of the Export Credit in 2006 was Tk.3, 075.80 millions. In the year 2007 it increases to Tk.4, 216.40 millions. Again in the next year the amount increases up to Tk.5, 792.80 millions. But in the year 2009 the Loans and Advances of the Export Credit decreases to Tk.5, 028.79 millions. In the year 2010 the amount again increases to Tk.5,059 millions.

vi) Trade Finance:

  Advances of Trade Finance was Tk.10, 239.90 millions in the year 2006. Next year in 2007 the amount increases to Tk.10, 339.20 millions. From the year 2008 to 2010 there was a sharply increasing trend in the Loans and Advances of Trade Finance. Like in the year 2008 the amount was Tk.15, 171.60 millions. In 2009 the amount was Tk.22, 559 millions and in the year 2010 the amount was Tk.35, 346.41 millions.

vii) Credit Card:

In the year 2006 the Loans and Advances of Credit Card was Tk.305.37 millions. In the year 2007 the amount decreases to Tk.264.76 millions. In 2007 the amount increases at Tk.253.12 millions. From the year 2009 to 2010 the Loans and Advances on Credit Card sharply increases. In 2009 the amount was Tk.265.09 millions and in 2010 the amount was Tk.412 millions.

 viii) Consumer Credit:

In the year 2006 the amount of Loans and Advances in Consumer Credit was Tk.55.53 millions. But in the year 2007 the amount decreases at Tk.48.2 millions. In the year 2009 the amount increases from Tk.55.42 millions to Tk.58.88 millions. In the year 2010 the amount again decreases at Tk.22.83 millions.

   Maturity Grouping of Loans and Advances Including Bills Purchased & Discounted :

Maturity grouping of loans and advances including bills purchased & discounted can be classified into the following six groups. To analyze them I have used five years data (from 2006 to 2010) of NBL. Those are explained below:

a) On Demand.

b) Within 1 month.

c) More than 1 month but not more than 3 months.

d) More than 3 months but not more than 1 year.

e) More than 1 year but not more than 5 years.

f) More than 5 years.

 Those are present below through table and graph.

 a) On Demand:

According to the maturity grouping of Loans and Advances including Bills Purchased & Discounted, On Demand Loan in the year 2006 was Tk.3, 492.50 millions. In the year 2007 the amount increases to Tk.4, 498.34 millions. But in the year 2008 the amount of Loans and Advances was decreases to Tk.1, 151.20 millions. Next two years the amount increases from Tk. 1,044.20 millions to Tk.1, 708.60 millions due to increasing the demand of the customer on Demand Loan.

b) Within 1 month:

 Zoans and Advances including Bills Purchased & Discounted, The loans which will be matured with in one month, the amount was Tk.2, 567.20 millions in 2006. In the year 2007 the amount was Tk.3, 972.20 millions. But in 2008 the amount sharply decreases at Tk.1, 213.15 millions. From the year 2009 the loan amount again increases from Tk.1, 527.19 millions and in 2010 the amount was Tk.2, 123.36 millions.

  More than 1 month but not more than 3 months:

 The Loans and Advances matured with in more than One Month but not More than Three Months, the amount was Tk.6, 146.37 millions. In 2007 the amount was 6,995.30 millions but in 2008 the amount was decreases at Tk.6, 364.30 millions. In 2009 the amount again increases at Tk.6, 428.42 millions and in 2010 the amount was Tk.6, 296.06 millions.

      More than 3 months but not more than 1 year:

 Loans and Advances matured with in more than Three Months but Not More than One Year, the loan amount was Tk.10, 454.08 millions in 2006 and Tk.11, 747.06 millions in 2007. From the year 2008 the loan amount sharply increases. In 2008 the amount was Tk.22, 233.50 millions, in 2009 the amount was Tk.23, 500 millions and in the amount was Tk.30, 316.02 millions.

More than 1 year but not more than 5 years:

 From the graph we can see a increasing trend in the Loans and Advances amount, matured with in More Than One Year but Not More Than Five Years.  In 2006 the amount was Tk.5, 832.24 millions and in 2007 the amount was Tk.6, 255 millions. From 2008 the loans and advances amount increased sharply. In 2008 the amount was Tk.11, 739.45 millions, in 2009 the amount was Tk.27, 813.70 millions and in 2010 the amount was Tk.37, 235.04 millions.

  More than 5 years:

The table is explained through Column Chart in below:

 The Loans and Advances, whose will matured with in More than Five Years, the amount was Tk.4, 217.25 millions in 2006. In 2007 the amount decreases at Tk.3, 007.30 millions but in 2008 the amount increases at Tk.7, 963.48 millions. In 2009 the amount again decreases at Tk.4, 649.40 millions and in 2010 the amount increases at Tk.8, 838 millions.

Classified, Unclassified, Doubtful and Bad Loans & Advances:

a) Unclassified Loans & Advances :

 The Unclassified Loans and Advances of NBL in 2006 was Tk.30, 742.52 millions and in 2007 was Tk.34, 824.64 millions. From the year 2008 there was a sharp increasing trend in the loans and advances amount up to year 2010. In 2008 the amount was Tk.47, 935.75 millions, in 2009 the amount was Tk.61, 082 millions and in 2010 the amount was Tk.85, 874.03 millions.

b) Classified, Sub-Standard, Doubtful and Bad Loans & Advances :

 In 2006 the Classified, Sub-Standard, Doubtful, Bad Loans and Advances of NBL was Tk.1, 967.20 millions. In 2007 the amount decreases at Tk.1, 651 millions. In the year 2008 the amount increases at Tk.2, 729.33 millions and in 2009 the amount again increases at Tk.3, 880.31 millions but in 2010 due to proper monitoring the amount decreases at Tk.3, 642.57 millions.

 CROSS – SECTION TECHNIQUES: In case of Cross – Section Techniques I have focused on following topics:

 NPLs to total loans ratios of PCBs and NBL

 Writing-off Bad Debts.

PLs to total loans ratios of PCBs and NBL:

 In the year 2006 the NPLs to Total Loan Ratios of NBL was 6.01 percentage and the PCBs was 55 percentages. In 2008, the NBL held 5.39 percent of the total industry loans as against 4.53 percent in 2007. PCBs’ percentage decreases to 44 percent in 2008 as against 50 percent in 2007. In 2010, the NBL held 3.96 percent of the total industry loans as against 5.97 percent in 2009. PCBs’ percentage decreases to 32 percent in 2010 as against 39 percent in 2009.

  Writing-off Bad Debts:

 In the year 2006 the Write-off Bad Debt of NBL was Tk.1.52 billion and the PCBs was Tk.40.7 billion. In 2008, the NBL held Tk.2.15 billion of the total industry loans as against Tk.1.78 billion in 2007. PCBs bad debt loan increases to Tk.49.4 billion in 2008 as against Tk.45.5 billion in 2007. In 2010, the NBL held Tk.2.94 billion of the total industry loans as against Tk.2.45 billion in 2009. PCBs amount increases to Tk69.6 billion in 2010 as against Tk.54.7 billion in 2009.

 FINDINGS

We can see from this report that the classified loan of the bank is decreasing, it means that efficiency of management is improving.

1. The realization of classified loan is increasing, because of good administration.
2. This bank is trying to improve their credit product to satisfy the consumer.
3. National Bank Ltd is trying to improve and straightening their credit policy.
4. National Bank tries to follow all rules and regulation given by Bangladesh Bank when they sanction any loan.
5. Trying to increase of credit in small and medium entrepreneur.
6. According to the ratio analysis, we can see that the amount of loans and advances are increasing year by year which is good sign for the bank. During the year of 2006 the Loans and Advances of NBL was Tk 32,709.68 millions and in the year 2010 the loans and advances of NBL increases upto Tk 92,003.56 millions. But they should careful about the bad debts.
7. The increasing percentage of advance deposit ratio is also positive. It increases 81.06%-89.78% in the year 2006-2010.

 It is also very difficult for me to give any recommendation with my little working experience but I have tried as my best to give best recommendation above shortcomings:

 NBL should give more freedom to their branches for taking decisions and their head office should take decision more quickly.

  NBL should build separate loan recovery division if it happened then their classified loan amount will reduce and they can invest more. .

  NBL should go through the online banking as early as possible for better service to the customer

•  All branches should properly maintain all documents on daily basis.
•  It is required to develop some effective motivational programs.
•  Interest rate should be increased.
•  Modern technology should be used to maintain documentation. Like computer, software for any calculation. If they store their documents in a computer, they can easily search it & it takes only few seconds.
•  They should try to minimize their risk level beside their investment.

I do believe that the suggestions and recommendations mentioned below will obviously increase the efficiency of National Bank Ltd. in analyzing credit schemes.

 CONCLUSION

I acknowledged different banking functions and day to bay banking operation on my way to complete this internship.

From my starting day to up to date my practical implementation of customer dealing procedure during the whole period practical orientation in NBL at Babubazar branch, I have to try my best to reach a firm and concrete a conclusion very confident way. In this report I have explained my best in respect of my real life experience gathered from different departments. I believe that my realization will be in harmony with most of the banking thinkers

Now a day banking sector is more competitive. To achieve a proper reward about performance, it is essential to satisfy its customer by providing them different valuable and dynamic services. Because a satisfied customer will talk to others about the services those he/she is very justifiable enjoying and a satisfied customers statement is more effective than a thousand of commercial advertisement. People depend on the people – is the mode of human civilization. Therefore, the importance to satisfy customer is increasing day by day in the private commercial sector especially in the private banks.

As all the activities those are required to provide valuable services to its customers to make them satisfy, are related with the fund management system, NBL is so much careful about its fund management system. NBL always gives its highest attention in monitoring and managing the bank fund, which is consists of fund, capital, reserve, deposit, loan and advance. At present NBL is successful in effectively and efficiently managing these vital issues. In spite of that, in order to keep its success continue and reach at the pinnacle of success it, its managers, board of directors and employee must have the comprehensive and clear idea about the reserve, fund, loan, capital, deposit and liquidity regarding the smooth control of bank and continue its vital operation toward country’s economic development.